Mobile payments mayhem

Financial institutions and mobile operators are acutely aware of the security concerns of consumers when it comes to entering the mobile payments space, but both are trying go it alone in most cases.

There have been a series of articles appearing in trade and mainstream press lately about the slow take-up of mobile payments, particularly NFC (Near Field Communication), using mobile phones. They present lots of theories but offer few conclusions, as the following extracts highlight.

Mobile Payments Today compares it the rollout of ATM machines that was only “spurred by a convergence of elements, including improved online connections, shared networks and a successful lawsuit against the practice of banning ATM surcharges, the industry grew explosively in the 1990s.”

There was also an element of distrust with a machine that swallowed your card if you got the PIN wrong three times and it was difficult to change the habit of a lifetime – the security of going into a bank and having someone to talk to whilst you were banking.

BillingViews reckons that competition between players in the payments and mobile spaces is slowing progress. “With two, if not three industries piling in to the mobile payments space, it is becoming a fascinating spectator sport.News just in that Facebook is about to test a mobile payments application that fills in payments forms using user information raises the bar again.”

A survey conducted by BillingViews revealed that even though 15 per cent of the 500 respondents were happy to try ‘direct to bill’ mobile payments using their mobile operator, the remaining 85 per cent didn’t think it sounded like a good idea.

In another survey of 1,000 financial services, technology, telecommunications and retail executives revealed that 83 per cent believed that mobile payments would “achieve widespread mainstream consumer adoption” by 2015. Confused? Not surprising as the optimistic view of executives appears to be the polar opposite of the consumers they are trying to woo.

There can be no doubt that consumers will be confused, too, as to who is offering what. They are used to their banks issuing credit and debit cards carrying trusted brands such as Visa and MasterCard but they appear to be surprisingly nervous about using that same card for NFC transactions, even more so using a mobile handset.

The U.S. consumer protection agency, the Federal Trade Commission (FTC) took a close look at mobile payments in a recent report that showed “a growing number of third parties have entered into agreements with carriers to place charges on mobile phone bills. However, there are no federal statutory protections governing consumer disputes about fraudulent or unauthorized charges placed on mobile carrier bills. As with prepaid cards, consumers must rely on the terms of their mobile carrier agreements or those companies’ good will when these disputes arise.”

In a study commissioned by the Federal Reserve in 2012 only about 12 per cent of mobile phone owners had made a mobile payment in the previous 12 months, and the most common use of mobile payments was to make an online bill payment (47 per cent). Concerns about the security of the technology were the primary reason given for not using mobile payments (42 per cent).

The FTC study raised concerns that mobile carrier billing platforms raised a unique challenge with regard to third parties placing fraudulent charges onto consumers’ mobile carrier bills (‘cramming’). “This development should cause concern for all stakeholders in the mobile payments marketplace because it threatens to undermine mobile carrier billing as a legitimate and trusted payment option.”

SunTec, providers of billing and transaction pricing platforms to both the finance and telecoms industries said that financial institutions and operators they service were acutely aware of the security concerns of consumers when it came to entering the mobile payments space, but that both were trying go it alone in most cases. This seems strange when it comes to mobile payments as each could surely learn from the other or, better still, work together.

Then we have ISIS the U.S. NFC-based mobile commerce network spearheaded by Verizon Wireless, AT&T Mobile and T-Mobile US involving all the key card processing firms. It’s not exactly flying either.

Should we start to panic or assume that, just like ATMs, the public mood will swing towards mobile payments in due course. The only question is how many casualties will fall by the way side until then?

Knut H FlottorpYou have to consider the US as a different market for mobile payment than the rest of the world. GSM can be used by the rest of the world to provide mil.spec. encryption of messages, need only be a 120 byte encryption key for the session. The EC introduce... moreYou have to consider the US as a different market for mobile payment than the rest of the world. GSM can be used by the rest of the world to provide mil.spec. encryption of messages, need only be a 120 byte encryption key for the session. The EC introduced a special body "micro-payment providers", and special regulations that this can be based on. It is thus not required for the operator / carrier to be involved in this at all, a third party like Visa and Mastercard can develop and offer the service. But since these are American companies, they are ignorant of the possibility. Instead the banks tries to provide "payment services" - which can be done as an annex to their "branch automation" applications. That the operator gets involved in this expose them to a credit risk that few are aware of, and the final, third alternative: a special payment provider that can interface to all should be made. The operator / carrier may be the main owner or the banks, but it must be a very simple c... less